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India's fintech sector has emerged as a cornerstone in the nation's economic framework and is expected to contribute an additional$400 billionto the national economy in the next seven years. A standout on the global fintech stage, India’s fintech landscape been a force in bringing financial services to the masses who were left out before.
Previous years' budget announcements have focused on bolstering the backbone of the economy—agriculture and MSMEs (Micro, Small and Medium Enterprises). In line with the emphasis on socio-economic empowerment, all eyes are on the policies that will enable access to financial solutions across the length and breadth of the country. As we gear up for this year's Union Budget, we're keen to see how it will give the fintech industry what it needs to keep innovating. It's not just about the money; it's about creating an environment that nurtures continuous progress in this ever-evolving financial landscape.
Empowering MSMEs
This year, we expect a special focus on meeting the needs of MSMEs, emphasising a smoother flow of credit. This would involve incentives for the creditors themselves through extended support to microfinance institutions (MFIs) and small finance banks (SFBs). To reach enterprises in remote corners of the country, we also foresee support to digital lending players that offer credit to merchants beyond Tier-II and III cities. This expansion is crucial in leveraging fintech's potential to boost the MSME sector, ensuring these businesses have the resources and support they need to thrive in a competitive market.
A recentCAFRALreport predicts that fintech lending will surpass traditional bank lending by 2030. For this to be possible, digital lending solutions must be rolled out beyond the metros, reaching small businesses and consumers in Tier-III cities and beyond. The anticipated impact of the Open Credit Enablement Network (OCEN) is poised to establish stronger credit flow to merchants across remote parts of the country.
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Responding to the anticipated growth of digital lending, especially for small ticket-size loans, we expect more checks and balances to protect borrowers. Regulatory developments like the forthcoming fintech SRO and cloud repository signal a potential commitment toward fostering a responsible and safe fintech ecosystem.
Progressing into the AI-led future with enhanced digital public infrastructure
In the previous year's Union Budget, the government allocatedRs1500 croresin incentives to fintechs and banks. Capital is welcome, but it is not a constraint for the BFSI space in India, being one of the most capitalised sectors in the country. Beyond capital infusion, we expect incentives for the ecosystem to encourage partnerships between fintech players, public institutions, banks, and NBFCs.
Fintech growth in India has been supported by digital public infrastructure, namely the India Stack, where the Unified Payments Interface (UPI) sits at itssecond layer.The expectation lies in nurturing an ecosystem where these partnerships between fintechs and public institutions flourish, not just in payments but also in credit, investments and insurance.
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Implementing innovation on top of the India stack starts with encouraging an environment for home-grown technological advancement. Following last year's budget's emphasis on the story of "make AI in India and make AI work for India", by establishing three centres of excellence for Artificial Intelligence (AI) in educational institutions, we expect a focus on further strengthening R&D for AI applications development through enhanced support to the National Supercomputing Mission. We will require sustained investments in local computing power to increase the country's self-reliance by driving the growth of local generative AI solutions.
Credit corpus for small and medium-sized fintechs
In line with incentives to broaden the reach of digital financial solutions, The Digital Lending Association of India (DLAI) expects a dedicated India Fintech Credit Fund (IFCF) to finance small and medium-sized fintech companies. The financial support would incentivise horizontal expansion beyond Tier-III cities. By nurturing growth in underserved regions, the fund would chart a course for these fintech players to act as economic stimulators in untapped markets. The ripples would not only be felt in the balance sheets of the companies sourcing these loans but also in reshaping the socio-economic landscape of India.
Conclusion
The focus of this year's budget is expected to shift towards fostering greater access to digital solutions, especially in the financial services space, across the country. This approach aligns with the broader narrative of encouraging increased participation in the formal economy. The trajectory conveys a consistent commitment to sectoral growth and a forward-looking approach, recognising the potential of fintech in steering India's economic course.
The writeris the co-founder and CEO at MobiKwik.
The thoughts and opinions shared here are of the author.
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FAQs
India is amongst the fastest growing FinTech Markets in the world. As of 2024, it is estimated to be around USD 110 billion, and by 2029, it is projected to reach an impressive around USD 420 billion at a CAGR of 31 percentage.
What is the future of fintech industry in India? ›
The promising Indian FinTech market is expected to reach $1 trillion in AUM and $200 billion in revenue by 2030. Indian FinTech ecosystem has emerged as a formidable global force and continues to grow as one of the largest FinTech markets globally.
What is the size of financial services market in India? ›
The fintech market in India was valued at 584 billion U.S. dollars in 2022. Lendingtech sector accounted for 270 billion dollars of the total market size.
What are the fintech innovations in India? ›
FinTech Innovation Categories
India has emerged as one of the robust FinTech economies in the world with landmark innovations like paperless lending, mobile banking, secure payment gateways, mobile wallets and other concepts that are already shaping a new and digitised India.
How much does fintech contribute to India's GDP? ›
Indian FinTech industry's market size is $584 Bn in 2022 and is estimated at ~$1.5 Tn by 2025. The Payments landscape in India is expected to reach $100 Tn in transaction volume and $50 Bn in terms of revenue by 2030. India's digital lending market was worth $270 Bn in 2022 and is expected to reach $350 Bn by 2023.
What is the growth forecast for India in 2024? ›
The International Monetary Fund had earlier also raised India's growth forecast to 7 per cent for the financial year 2024-25 (FY25), following the conclusion of general elections in the country.
What is the fintech industry outlook for 2024? ›
In 2024, the fintech market size will exceed $340 bn, and by 2032, this figure will increase almost fourfold and reach $1,152 bn. Such rapid growth will provide a staggering compound annual growth rate (CAGR) of 16.5% and will push the rise of new fintech sectors and banking services.
What is the next big trend in fintech? ›
The trend towards ownership of virtual real estate and digital assets is only likely to continue as online spaces become more immersive, accessible and integrated into our lives. By 2035, entire virtual economies may have emerged, complete with currencies, financial systems and regulatory frameworks.
What is the growth rate of fintech in India? ›
Estimated CAGR of fintech market in India 2022-2030, by segment. Investment tech is anticipated to be the fastest growing fintech sector in India growing at a rate of 30 percent during 2022 and 2030. Followed by fintech SaaS sector growing at CAGR of 27 percent.
What is the size of financial services market in India 2024? ›
*The AUM of the Indian MF Industry has grown from Rs. 9.16 trillion (US$ 110.63 billion) in 2014, to Rs. 54.54 trillion (US$ 658.72 billion) in 2024, growing ~6x in a span of 10 years. *Investment corpus in Indian insurance sector might rise to US$ 1 trillion by 2025.
What Are The Recent Trends In The Financial Market In India? The financial industry in India has witnessed several recent trends, such as growth of digital banking, the widespread adoption of contactless payments, and the rise of fintech startups offering innovative financial solutions.
Why fintech is the future in India? ›
Benefits of Fintech!
Financial Inclusion: Fintech has the potential to bridge the gap between the banked and unbanked populations in India. With innovative solutions like mobile banking, digital wallets, and peer-to-peer lending platforms, FinTech can extend financial services to the country's remotest corners.
What are the top 5 countries leading in fintech innovation? ›
It's no secret that the United States has the best fintech ecosystem in the world, with the United Kingdom and Singapore trailing closely behind. Their winning combination of available talent, healthy competition, enabling regulations, and financial stability gives them an edge that's hard to beat.
Is India a fintech hub? ›
"The study reveals that vibrant hubs such as Singapore, the UK, the US, and India have hosted a thriving cluster of fintech corporate headquarters. "Among the countries surveyed, the most significant operating countries for fintechs include the US, the UK, Singapore, Mexico, and India," it added.
What is the prediction for fintech in 2025? ›
Artificial Intelligence( AI) and Machine Learning (ML) integration are critical fintech trends. Industry experts expect it to shape the industry in 2025. These technologies can improve the efficiency, security, and personalization of financial services. They will drive big improvements in the customer experience.
What is the size of India fintech market 2030? ›
The lendingtech sector in India is anticipated to reach over one trillion U.S. dollars in 2030, growing at a compound annual growth rate (CAGR) of 22 percent during 2022 and 2030. The overall fintech market is estimated to grow to about 2.1 trillion dollars.
What is the market size of fintech in 2026? ›
What is the future of fintech in 2050? ›
In 2050, the payments ecosystem (acquirers, PSPs, facilitators, and aggregators) will revolve around creating integrated capabilities within an ecosystem of partners to truly optimise the customer experience and deliver a seamless, personalised payments journey from awareness to purchase and long-term retention.